GM invests in Lordstown Motors merger that will make it publicly traded

By Jamie LaReau - Aug 03, 2020

The electric Endurance pick-up truck at Lordstown Motors Corporation is shown on June 25, 2020, in Lordstown, Ohio. (Photo: Tony Dejak, Associated Press)

The electric Endurance pick-up truck at Lordstown Motors Corporation is shown on June 25, 2020, in Lordstown, Ohio. (Photo: Tony Dejak, Associated Press)

 

Electric-truck maker Lordstown Motors is becoming a publicly traded company in a deal that will add $675 million to its coffers and boost its valuation to $1.6 billion, the company announced Monday. 

This transaction includes a $500 million fully committed private investment in public equity (PIPE), which includes $75 million of investments by General Motors, Lordstown Motors said.

The company, which bought GM's former massive Lordstown Assembly plant in Ohio last year, said it is merging with Delaware-based DiamondPeak Holdings Corp. DiamondPeak is a special purpose acquisition company and this merger will result in Lordstown Motors becoming a publicly listed company. 

The combined company will be called Lordstown Motors Corp. and is expected to be listed  on the NASDAQ, trading under the new ticker symbol, “RIDE.” The transaction is expect to close in September or October, a Lordstown Motors spokesman said.

 

'Lordstown stood out'

 

“We are thrilled with the opportunity to build Lordstown Motors into a top-tier electric truck company that is highly differentiated from the competition," Lordstown Motors CEO Steve Burns said in a prepared statement. "We are uniquely positioned to be a leader in the industry."

During a morning call with analysts that offered prepared remarks only, with no question and answer session, DiamondPeak CEO David Hamamoto said his team evaluated many investment options, but “Lordstown stood out as a differentiated high-growth company” that has a “transformation product and business plan.”

DiamondPeak was attracted to Lordstown Motors management team’s “vast” experience, its strategic relationships in the industry and the fact that it is “one of the first electric vehicle manufacturers to acquire a plant that is production ready,” Hamamoto said. 

Also during the call, Burns added that owning GM's former plant gives Lordstown Motors an edge. 

“We have full ownership and control over the production of our vehicles," Burns told analysts. "Given its location in the Mahoning Valley, that location gives us access to a deep pool of talent including a trained manufacturing workforce.” 

 

GM's part in the deal

 

GM has its own electric vehicle strategy underway with the promise to deliver to market at least 20 new electric vehicles by 2023. As part of that strategy it plans to build batteries at a plant adjacent to Lordstown Motors assembly plant.

But GM also is investing $75 million in Lordstown Motors, a potential future rival in the electric pickup market through a PIPE investment. A PIPE is a mechanism that allows institutional investors to invest in private companies, which Lordstown is right now, said GM spokesman Jim Cain. GM's investment includes $25 million in cash plus non-cash assets (including the plant and equipment).

"GM is excited about the progress LMC has made because we believe production of the Endurance pickup will help create jobs in the Lordstown community," said Cain.

A pro forma ownership will be divided among the investors in DiamondPeak, the PIPE and the existing shareholders, Cain said.

The pro forma implied equity value of the combined company is approximately $1.6 billion, assuming a $10 per share PIPE price and assuming there are minimal redemptions by DiamondPeak stockholders.

On Wednesday, GM broke ground on its new battery facility near Lordstown Motors facility. There, GM will make the Ultium batteries for its electric vehicles including its own Hummer electric pickup to be assembled at the Detroit Hamtrack Assembly plant starting later next year.

GM has has partnered with LG Chem to make the batteries at the Ohio plant, which will eventually create over 1,000 jobs in that area. That plant is to be called Ultium Cells LLC.

 

$1.4 billion in pre-orders

 

About $675 million of gross proceeds are expected from the transaction. Those will fund production of the Lordstown Endurance all-electric light-duty pickup, due to market next year.

In addition to the financial support, Burns said this merger will give Lordstown Motors access to a wide network of industry partners to drive the development and commercialization of Lordstown’s Endurance.

The pickup will deliver the equivalent of 75 miles per gallon and has been engineered and priced for the large commercial fleet market.

 

Lordstown Motors CEO Steve Burns, left, and Vice President Mike Pence unveil the new electric pickup, Endurance, on June 25, 2020, Lordstown, Ohio. (Photo: PHIL MASTURZO, AKRON BEACON JOURNAL)

Lordstown Motors CEO Steve Burns, left, and Vice President Mike Pence unveil the new electric pickup, Endurance, on June 25, 2020, Lordstown, Ohio. (Photo: PHIL MASTURZO, AKRON BEACON JOURNAL)

 

“If you’re stuck in the mud next to a traditional pickup, we’ll come out first," Burns told the Free Press in May, referring to the pickup's capabilities. At the time, he also said that Lordstown Motors will be first to market with a light-duty electric pickup and the demand for such a vehicle exists.

"You don’t create need, there is a demand for this," Burns said. "We will be the first electric work truck and nobody will have that for years."

Lordstown Motors unveiled the Endurance in June and has received 27,000 orders which represents $1.4 billion in potential revenue mostly from commercial fleet customers, the company said. 

Of course there are competitors. Ford Motors is an investor in electric truck maker, Rivian. Although the two put their plans on ice to jointly develop a Lincoln-brand electric vehicle in April. Ford said the current economy has created new and unexpected challenges, so this particular project is postponed. 

The Rivian R1T pickup will get more than 400 miles of driving range and acceleration times comparable with those of a supercar, reports say. It's expected to enter production as the 2021 R1T.

Also, electric automaker Tesla is developing the Cybertruck due to market in 2022.

The Endurance, to be built using components licensed from electric-truck maker Workhorse near Cincinnati, is priced at $52,500 and it's eligible for the $7,500 federal tax rebate. The Ford F-150 and Chevy Silverado internal combustion pickups, in comparison, both start at around $28,500. Those can go up to $55,000 or more for top trim levels.

 

Access to workers

 

In May, Burns also told the Free Press that he had big plans for the 6.2-million-square-foot facility in Lordstown, Ohio, that he bought from GM. GM had last built the Chevrolet Cruze compact car there before idling the plant for good early last year as part of a cost-cutting measure. 

 

Lordstown (OH) Assembly Plant , 2017. (Photo: General Motors, General Motors)

Lordstown (OH) Assembly Plant , 2017. (Photo: General Motors, General Motors)

 

Burns said he will start hiring 600 workers next year to build the first 20,000 Endurance pickups.

Then, starting in 2022, Burns will hire more people to build other all-electric vehicles, such as SUVs and a midsize pickup.

“We didn’t buy a mass volume plant like this and not plan to fill it up," Burns said. "This is a gem of a building built for volume manufacturing."

Burns has said he expects to employ 4,000 to 5,000 people in the plant in the near future based on demand for electric vehicles, adding, "We think the electric pickup is the new normal.”

On Monday Burns told Wall Street analysts, “We hear from many fleets that they can’t wait to get their hands on the Endurance.”

 

SOURCE: Detroit Free Press